Principles of Microeconomics
8th Edition
ISBN: 9781337470384
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Chapter 9, Problem 3PA
Subpart (a):
To determine
The impact of developing the production in one important country.
Subpart (b):
To determine
The impact of developing the production in one important country.
Sub part(c):
To determine
The impact of developing the production in one important country.
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When China’s clothing industry expands, the increase in world supply lowers the world price of clothing.
a. Draw an appropriate diagram to analyze how this change in price affects consumer surplus, producer surplus, and total surplus in a nation that imports clothing, such as the United States.
b. Now draw an appropriate diagram to show how this change in price affects consumer surplus, producer surplus, and total surplus in a nation that exports clothing, such as the Dominican Republic.
c. Compare your answers to parts (a) and (b). What are the similarities and what are the differences? Which country should be concerned about the expansion of the Chinese textile industry? Which country should be applauding it?
The graph above is the U.S. market for some imported good. Supply is a flat curve. The U.S. can import the Chinese good for $40 and the Mexican good for $48. Assume the U.S. imposes $10 tariffs on each unit of the imported good. What will be the quantity imported? From which country? How your answer will change if the U.S. keep the $10 tariffs but join a trade bloc with Mexico? Will the country’s wellbeing increase or decrease? By how much (hint find the change in consumer surplus and the change in government revenue)? Explain your answers.
Steel Industry
Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel.
Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph.
1. Because this country exports steel, the world price is represented by P1 or P2.
Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad.
2. With this export subsidy, the price paid by domestic consumers is $???? per ton, and the price received by domestic producers is $???? per ton.
3. The quantity of steel consumed by domestic consumers INCREASES or REMAINS UNCHANGED or DECREASES, the quantity of steel produced by domestic producers INCREASES or REMAINS UNCHANGED or DECREASES, and the quantity of steel exported INCREASES or REMAINS UNCHANGED or DECREASES.
4. TRUE or FALSE:…
Chapter 9 Solutions
Principles of Microeconomics
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